The Regional Provident Fund CommissionerTamil Nadu & Pondicherry StateEmployees' Provident Fund Organisation20 v. Wipro Limited

JUDGMENTP.JYOTHIMANI,J.This appeal is directed against the order of the learned SingleJudge dated 22.9.2006 made in W.P.No.3299 of 1999, by which thelearned Single Judge has allowed the writ petition filed by the firstrespondent herein, while setting aside the order of the Employees'Provident Fund Appellate Tribunal dated 24.11.1998 in Appeal No.ATA-13(83)98 and also the order of the appellant dated 14.7.1998.2.1. Between the employees of the first respondent and the firstrespondent/employer there was a settlement entered into under Section12(3) of the Industrial Disputes Act, 1947, under which the thenexisting canteen subsidy was agreed to remain unchanged till the endof one year from the date of settlement, which was entered on7.8.1990, 21.10.1994 and 1.12.1997. As per one of the clauses of thesettlement, it was agreed that the canteen subsidy would not attractprovident fund and the said canteen subsidy was stated to be analternate to providing canteen and that the benefit of the canteensubsidy would be withdrawn at the will of the writ petitioner/firstrespondent herein.2.2. Further, in the first respondent's factory, a PerformanceLinked Compensation Scheme was introduced in the year 1992 for theemployees who are covered under the settlement dated 7.8.1990 andsuch other workmen as the first respondent/employer may decide fromtime to time. It is also stated that the payment made under thescheme would not attract the provident fund contribution.2.3. The appellant called for the particulars about the canteensubsidy from the first respondent/employer by notice dated 5.6.1996,which was replied on 11.7.1996 and thereafter, the appellantproceeded under Section 7-A of the Employees' Provident Funds andMiscellaneous Provisions Act, 1952 (for brevity, "the EPF Act").Ultimately, the appellant, by order dated 14.7.1998, decided that thecanteen subsidy and performance linked compensation would attractprovident fund contribution and directed the first respondent to payprovident fund dues from their respective due dates and also decidedthat the grade allowance will not come within the definition of"basic wages" or "dearness allowance" and will not attract theprovident fund deduction.2.4. The appeal filed by the first respondent/employer againstthe said order has also been dismissed by the Employees' ProvidentFund Appellate Tribunal in its order dated 24.11.1998, concurringwith the appellant, as against which the first respondent has filedthe writ petition, insofar as it relates to the direction to payprovident fund contribution in respect of canteen subsidy and https://hcservices.ecourts.gov.in/hcservices/ performance linked compensation. The finding of the appellant inrespect of the grade allowance in favour of the first respondent hasbecome final.2.5. The learned Single Judge, having agreed with the contentionof the first respondent that the cash value of any food concession isexcluded from "basic wages"; that the canteen subsidy cannot betreated as a cash value of any food concession and the concession isnot equivalent to the subsidy of the canteen; and that the settlemententered under Section 12(3) of the Industrial Disputes Act is bindingon the parties and when such settlement excluded canteen subsidy, theappellant cannot make a demand for contribution under the EPF Act,has ultimately held that the impugned order of the appellant dated14.7.1998, as confirmed by the second respondent, by order dated24.11.1998, is not valid.3.1. It is the contention of Mr.K.Ramu, learned counsel appearingfor the appellant/Department that the EPF Act, being a social welfarelegislation, should be liberally interpreted, especially in thecontext of Section 6 of the Act, which has overriding effect. It ishis further submission that by virtue of Explanation to Section 6 ofthe EPF Act, "dearness allowance" is deemed to include with the term"basic wages", and the value of any food concession allowed to theemployee also should be included. Therefore, according to him, thesaid Explanation takes away the ambit of Section 2(b)(i) of the EPFAct, which specifically excludes the cash value of any foodconcession. 3.2. His further submission is that Section 2(b) of the EPF Actis a definition section, while Section 6 of the EPF Act is a chargingsection and therefore, Section 6 of the EPF Act has to be giveneffect to. To substantiate his contention, he relies upon thejudgment of the Supreme Court in Bridge & Roof Co. (India) Ltd. v.Union of India, AIR 1963 SC 1474=62 (2) LLJ 490.3.3. According to him, the concession is treated as an amountpaid in cash and so it is deemed to be earned and therefore, theappellant was well within its authority in directing the firstrespondent to make contribution under the EPF Act. 3.4. He also vehemently contends that a settlement entered intounder Section 12(3) of the Industrial Disputes Act cannot go againstthe statute, especially when it is a beneficial legislation.4.1. On the other hand, Mr.S.Raveendran, learned counselappearing for the first respondent contends that what is contemplatedis the amount paid or payable in cash or in sum assured. https://hcservices.ecourts.gov.in/hcservices/

4.2. He would submit that by reading Explanations 1 and 2 toSection 6 of the EPF Act, it is clear that in respect of permanentemployees, who are in seasonal establishment, during non-season, whenthey are retained, the allowance paid during that time should betreated as basic wage. He would submit that cash value of any foodconcession could arise only in an establishment like cateringestablishment, wherein cash value of any food concession may be takenas wages, as per Section 2(13-A) of the Tamil Nadu CateringEstablishments Act, which is a State Act and where the canteen is astatutory requirement, and not to the first respondent factory, wherecanteen is not a statutory requirement at all.4.3. He would further submit that even under the Factories Act,there is no compulsion for providing food, much less subsidized food.The cash value of any food cannot be paid nor is payable to allemployees. It is only in cases where there is a compulsion on thepart of the employer to provide food on concession, the question ofapplicability of Explanation (1) to Section 6 of the EPF Act wouldarise.4.4. He would refer to the provisions of the settlement enteredinto under Section 12(3) of the Industrial Disputes Act and contendthat using of canteen is only optional and there is no compulsion andit is not forming part of the employment. He would also rely uponthe judgment in 1984 (1) LLJ 300 to substantiate his contention inrespect of the settlements entered either under Section 12(3) or 18(1) of the Industrial Disputes Act. 5. Section 6 of the EPF Act, which is as follows, mandates anemployer to contribute 10% of the basic wages, which includesdearness allowance and retaining allowance, if any, and the employeescontribution shall be equal to that and so on."Section: 6.- Contributions and matters which may beprovided for in the Scheme:The contribution which shall be paid by the employer tothe Fund shall be ten per cent of the basic wages,dearness allowances and retaining allowance (if any),for the time being payable to each of the employees(whether employed by him directly or by or through acontractor), and the employees' contribution shall beequal to the contribution payable by the employer inrespect of him and may, if any employee so desires, bean amount exceeding ten per cent of his basic wages,dearness allowance and retaining allowance (if any),subject to the condition that the employer shall not beunder an obligation to pay any contribution over andabove his contribution payable under this section: https://hcservices.ecourts.gov.in/hcservices/ Provided that in its application to any establishment orclass of establishments which the Central Government,after making such inquiry as it deems fit, may, bynotification in the Official Gazette specify, thissection shall be subject to the modification that forthe words "ten per cent", at both the places where theyoccur, the words "twelve per cent" shall besubstituted : Provided further that where the amount of anycontribution payable under this Act involves a fractionof a rupee, the Scheme may provide for the rounding offof such fraction to the nearest rupee, half of a rupeeor quarter of a rupee.Explanation 1 : For the purposes of this section,dearness allowance shall be deemed to include also thecash value of any food concession allowed to theemployee.Explanation 2 : For the purposes of this section,retaining allowance means an allowance payable for thetime being to an employee of any factory or otherestablishment during any period in which theestablishment is not working for retaining his services."6. Explanation (1) to Section 6 of the EPF Act, which iscertainly the charging section of the EPF Act, includes cash value ofany food concession allowed to the employee as forming part ofdearness allowance. Likewise, an important term under the saidsection, namely "retaining allowance" is defined as an allowancepayable during the period for which the establishment is not working,but, at the same time, retaining the services of the employees.7. The term "basic wages" explained under Section 6 of the EPFAct is defined under Section 2(b) of the EPF Act, as follows:"2(b) "basic wages" means all emoluments which areearned by an employee while on duty or on leave or onholidays with wages in either case in accordance withthe terms of the contract of employment and which arepaid or payable in cash to him, but does not include : (i) the cash value of any food concession; (ii) any dearness allowance (that is to say, all cashpayments by whatever name called paid to an employee onaccount of a rise in the cost of living), house-rentallowance, overtime allowance, bonus, commission or anyother similar allowance payable to the employee in https://hcservices.ecourts.gov.in/hcservices/ respect of his employment or of work done in suchemployment;(iii) any presents made by the employer"8. It states in exhaustive terms that basic wages are theemoluments earned by an employee in terms of the contract ofemployment paid or payable in cash. However, it excludes the cashvalue of any food concession. The basic wages does not also includedearness allowance under Section 2(b) of the EPF Act. The dearnessallowance shall be in cash payments by any name on account of rise inthe cost of living.9. But, under Section 6 of the EPF Act, the obligation of theemployer to make contribution under the scheme is not only on thebasic wages, but also dearness allowance and retaining allowance.Since the dearness allowance also includes the cash value of any foodconcession allowed to any employee as per Explanation (1) to Section6 of the EPF Act, there is an apparent conflict between Section 2(b)and Section 6 of the EPF Act in respect of the cash value of any foodconcession. But, a harmonious construction of the said provisionsshould be, in our considered view, that in respect of basic wages,the cash value of any food concession or dearness allowance may notbe included, but for the purpose of obligation of the employer tocontribute under the scheme, the dearness allowance has to be takeninto consideration along with the basic wages, the dearness allowanceis deemed to include the cash value of any food concession allowed tothe employee and in that view of the matter, the cash value of anyfood concession given should also be taken into consideration for thepurpose of contribution by the employer under the scheme.10. As far as the retaining allowance is concerned, there is nodifficulty since it may apply to the seasonal employment, whereinpermanent employees are appointed and during non-seasons they arepaid allowances and they should form part of the obligation of theemployer to make contribution under the scheme.11. In Bridge & Roof Co. (India) Ltd. v. Union of India, 62 (2)LLJ 490=AIR 1963 SC 1474, the Constitutional Bench of the SupremeCourt had an occasion to discuss about the said apparent conflictbetween Section 2(b) and Section 6 of the EPF Act, with particularreference to Section 2(b)(ii) of the EPF Act relating to dearnessallowance, house rent allowance, over-time allowance, bonus, etc. Infact, the Constitutional Bench of the Supreme Court had made anobservation about Section 2(b)(i) of the EPF Act, viz., cash value ofany food concession, and Section 2(b)(iii) of the EPF Act, viz., anypresents made by the employer, and observed that the term"emoluments" must be paid or payable in cash and the cash value ofany food concession excluded from wages was observed to be notpayable in cash. Of course, before the Hon'ble Supreme Court, the https://hcservices.ecourts.gov.in/hcservices/ issue was relating to the production bonus earned by an employee.While making observation regarding Section 2(b)(i) and 2(b)(iii) ofthe EPF Act, the Supreme Court has held as follows:"The main question therefore that falls for decision isas to which of these two rival contentions is inconsonancewith s. 2 (b). There is no doubt that"basic wages" as defined therein means all emolumentswhich are earned by an employee while on duty or onleave with wages in accordance with the terms ofthe contract of employment and which are paid orpayable in cash. If there were no exceptions tothis definition, there would have been no difficulty inholding that production bonus whatever be itsnature would be included within these terms. Thedifficulty, however, arisesbecause the definition alsoprovides that certain things will not be included inthe term "basic wages", and these are contained inthree clauses. The first clause mentions the cashvalue of any food concession while the thirdclause mentions any presents made by the employer.The fact that the exceptions contain even presents madeby the employer shows that though the definitionmentions all emoluments which are earned in accordancewith the terms of the contract of employment, carewas taken to exclude presents which would ordinarilynot be earned in accordance with the terms of thecontract of employment. Similarly, though thedefinition includes "all emoluments" which are paid orpayable in cash, the exception excludes the cashvalue of any food concession, which in any case was notpayable in cash. The exceptions therefore do notseem to follow any logical pattern which would be inconsonance with the main definition."(emphasis supplied)12. While holding that the production bonus of the kind in forcein the said Company was excepted from the term "basic wages" andtherefore, there cannot be a compulsion on the employer therein tocontribute under the scheme on the production bonus, the SupremeCourt, in the above said decision, has held as follows:"Then we come to Cl.(ii). It excludes dearnessallowance, house-rent allowance, overtime allowance,bonus, commission or any other similar allowancepayable to the employee in respect of his employmentor of work done insuch employment. Thisexception suggests that even though the main partof the definition includes all emoluments which areearned in accordance with the terms of the contract ofemployment, certain payments which are in fact the priceof labour and earned in accordance with the terms of https://hcservices.ecourts.gov.in/hcservices/ the contract of employment are excluded from the mainpart of the definition of "basic wages". It isundeniable that the exceptions contained in Cl.(ii)refer to payments which are earned by an employee inaccordance with the terms of his contract ofemployment. It was admitted by counsel on both sidesbefore us that it was difficult to find any one basisfor the exceptions contained in the three clauses. Itis clear however from Cl. (ii) that from the definitionof the word "basic wages" certain earnings wereexcluded, thoughthey must be earned by employees in accordance withthe terms of the contract of employment. Havingexcluded "dearness allowance" from the definition of"basic wages", S.6 then provides for inclusion ofdearness allowance for purposes of contribution. Butthat is clearly the result of the specificprovision in s.6 which lays down thatcontribution shall be 6¼ per centum of the basicwages, dearness allowance and retaining allowance (ifany). We must therefore try to discover some basisfor the exclusion in Cl. (ii) as also the inclusion ofdearness allowance and retaining allowance (if any) inS.6. It seems that the basis of inclusion in S.6 andexclusion in Cl.(ii) is that whatever is payable inall concerns and is earned by all permanentemployees is included for thepurpose, ofcontribution under s. 6, but whatever is not payable byall concerns or may not be earned by all employees of aconcern is excluded for the purposeof contribution.Dearness allowance (for example) is payable in allconcerns either as an addition to basic wages or as apart of consolidated wages where aconcern does nothave separate dearness allowance and basic wages.Similarly, retaining allowance is payable to allpermanent employees in all seasonal factories likesugar factories and is therefore included in S.6, buthouse-rent allowance is not paid in many concerns andsometimesin the same concern it is paid tosome employees but not to others, for the theory isthat house-rent is included in the payment of basicwages plus dearness allowance or consolidated wages.Therefore, house-rent allowance which may not bepayable to all employees of a concernand which iscertainly not paid by all concern is taken out of thedefinition of "basic wages", even though the basisof payment of house rent allowance where it is paidis the contract of employment.Similarly, overtimeallowance though it is generally in force in allconcerns is not earned by all employees of a concern. https://hcservices.ecourts.gov.in/hcservices/ It is also earned in accordance with the terms of thecontract of employment; but because it may not beearned by all employees of aconcern it is excluded from "basic wages". Similarly,commission or any other similar allowance is excludedfrom the definitionof "basic wages" for commissionand other allowances are not necessarily to be found inall concerns; nor are they necessarily earned by allemployees of the same concern, though where they existthey are earned in accordance with the terms of thecontract of employment. It seems therefore thatthe basis for the exclusion in Cl. (ii) of theexceptions in S.2(b) isthat all that is not earned inall concerns or by all employees of concern isexcluded from basic wages. To this, the exclusionofdearness allowance inCl.(ii) is an, exception.But thatexception has been corrected by includingdearness allowance in S. 6 for the purpose ofcontribution. Dearness allowance which is an exception in, the definition of "basic wages", is includedfor the purpose of contribution by S.6 and the realexceptions therefore in cl. (ii) are the otherexceptions beside dearness allowance, which has beenincluded through S.6"13. In the context of the judgment of the Supreme Court, we haveto make a reference to some of the provisions of the settlemententered into under Section 12(3) of the Industrial Disputes Act,especially with reference to the canteen subsidy. In the settlemententered on 21.10.1994, in the presence of the Assistant Commissionerof Labour (Conciliation) I, Madras-6, the following is the clauseregarding canteen subsidy:"J. Canteen Subsidy:The issue of providing a canteen in the factory wasdiscussed between the parties.In view of the fact that majority of the workmen carrytheir own lunch to the factory, it was mutually agreedthat the Management shall continue to pay canteensubsidy in lieu of providing a canteen.1. Effective date of settlement, each workman will beeligible for canteen subsidy of Rs.7/- (Rupees sevenonly) per day actually worked by the workman.2. Further, effective the date of completion of a periodof one year from the above date, each workman will beeligible for a canteen subsidy of Rs.8/- (Rupees eightonly) per day actually worked by the workman. https://hcservices.ecourts.gov.in/hcservices/

3. Further, effective the date of completion of a periodof two years from the above date, each workman will beeligible for a canteen subsidy of Rs.9.05 (Rupees nineand paise five only) per day actually worked by theworkman.4. Canteen subsidy will not be payable when workman doesnot attend duty for any reason.5. Canteen subsidy will be payable only if a workmanputs in actual work of minimum 4 hours in a day.6. Canteen subsidy payable to any workman shall be paidalong with monthly salary.7. Canteen subsidy will not attract house rentassistance, bonus, provident fund, gratuity overtime orany other benefit.8. Both the parties explicitly understand and agree thatthe canteen subsidy has been provided in lieu ofcanteen. In the event of the Management being requiredto provide a canteen for any reasons, the canteensubsidy paid as above shall be withdrawn."14. The above said clause clearly stipulates that the canteensubsidy provided is in lieu of the canteen. It also states that incases where the management is compelled to have canteen the subsidywill be withdrawn.15. Again in the settlement entered into under Section 12(3) ofthe Industrial Disputes Act before the Assistant Commissioner ofLabour (Conciliation) I, Chennai-600 006, dated 1.12.1997, clause'J', is as follows:"J. Canteen Subsidy:The issue of providing a canteen in the factory wasdiscussed between the parties. Both the Management andthe Union agreed to continue the canteen subsidy, withsome modifications, instead of providing canteen.Consequently, the canteen subsidy has been modified asunder:1. Effective from the date of signing of this settlementeach worker will be paid canteen subsidy of Rs.245/- permonth.2. From the second year of the date of signing of thissettlement each worker shall be paid canteen subsidy ofRs.255/- per month. https://hcservices.ecourts.gov.in/hcservices/

3. From the third year of the date of signing of thissettlement each worker shall be paid canteen subsidy ofRs.265/- per month.4. Canteen subsidy will be paid proportionate to thenumber of days worked by each workman during thecalendar month.5. Canteen subsidy payable to any workman shall be paidalong with the monthly salary.6. Canteen subsidy will not attract PF, Bonus, Gratuity,Overtime or any other benefit or allowance.7. Both the parties explicitly understand and agree thatthe canteen subsidy has been provided in lieu ofcanteen. In the event of the Management being requiredto provide a canteen for any reasons, the canteensubsidy paid as above will be withdrawn.8. The Management reserves the right to amend, adjust orwithdraw this canteen subsidy in the event of anylegislation or Government notification that may come into force requiring the Company to pay DearnessAllowance, House Rent Allowance, Conveyance Allowanceand/or any other allowance."16. The parties have agreed that the management has a right towithdraw the subsidy in the event of a notification by the Governmentrequiring the company to pay dearness allowance, etc.17. It is also the specific case of the firstrespondent/Management that, if the canteen is to be run by themanagement, by supplying the food stuffs and beverages, the amountspent by way of subsidy for running the canteen is not to be treatedas wages and while so, the canteen subsidy, which is provided underthe settlement entered into under Section 12(3) of the IndustrialDisputes Act, is only the division of the amount to be spent for thecanteen facility to those who use it, among all workmen. When thereis no compulsion on the part of the first respondent/ Management toprovide canteen and such compulsion is not available in allindustries also, except in few cases where there are statutoryprovisions, like the catering establishments, and use of such canteenis also not compulsory to all workmen and it is only optional, thereis sufficient force in the contention of the learned counsel for thefirst respondent/employer that no value of food concession can bemade in the form of money, especially in the circumstances thatrunning of canteen is not a statutory requirement. https://hcservices.ecourts.gov.in/hcservices/

18. As submitted by the learned counsel for the first respondent,the Tamil Nadu Catering Establishments Act, 1958, which applies to"catering establishment" defined under Section 2(1) of the said Act,defines "wages" in different terms when compared to the definitionunder the EPF Act. Section 2(13-A) of the Tamil Nadu CateringEstablishments Act, 1958, which defines "wages" makes it clear thatit includes the concessional supply of food grains and otherarticles, which can be computed in terms of money. Section 2(13-A)of the Tamil Nadu Catering Establishments Act, 1958 reads as follows:"Section 2(13-A): "wages" means the basic wages,dearness allowances, the cash equivalent of the mealsand tiffin supplied to the employees free of charge andthe value of any other amenity or of service or of anyconcessional supply of food grains or other articleswhich can be computed in terms of money, but does notinclude a bonus."19. In Tata Power Company Limited and Others v. RegionalProvident Fund Commissioner, Maharashtra & Goa and Others, 2008 (III)LLJ 992 (Bombay), it was held that in respect of supply of anamenity, such value of concession can be deduced only when such goodsare supplied without which it is not possible to calculate the value.Of course, while referring to the Minimum Wages Act, 1948 in thatcase, the High Court has relied upon the judgment of the SupremeCourt in Manganese Ore (India) Limited v. Chandi Lal Saha, 1999 (III)LLJ (Supp) 1537=AIR 1991 SC 520 and held as follows:"15. One thing that is clear from the decision is thatthere has been a practice in industrial employment inthis country where the cash value of various benefitsconcessional supply of food grains is computed whilereckoning the charges payable. Under the Minimum WagesAct the cash value of a concession always means theamount by which the value of an essential supply isreduced when supplied. Therefore the term "cashvalue of any food concession" allowed to the employeemeans such value of the component by which the price ofthe item is reduced. This necessarily postulates theprovision of the supply of an amenity such as food grainfor, without such supply, it would not be possible tocalculate the value of any food concession allowed tothe employee. There being no supply of any food by thepetitioner, the payment of food allowance cannot betreated as the cash value of food concession allowed tothe employee."20. The learned Judge, in the impugned judgment, has heldcorrectly, in our view, that such amount which is capable of earningmust be as per the contract of employment, by referring to the https://hcservices.ecourts.gov.in/hcservices/ Division Bench judgment of this Court in the Employees StateInsurance Corporation, Madras v. E.I.D. Parry (India) Limited, 1984LAB. I.C. 122 and the judgment of the Supreme Court in Braithwate andCo. (India) Ltd. v. Employees State Insurance Corporation, AIR 1968SC 413; and that it is legitimate for the employees, while settlingthe disputes, to come to a settlement that certain payments shall notbe reckoned for the purpose of provident fund, etc.21. We are of the considered view that the reasons givenhereinabove, insofar as canteen subsidy is concerned, are equallyapplicable to the performance linked compensation and suchcompensation also would not attract provident fund contribution.For the reasons aforesaid, we do not see any reason to interferewith the order of the learned Single Judge. The writ appeal failsand the same is dismissed. No costs. Sd/Asst.Registrar/true copy/Sub Asst.RegistrarsasiTo:1. The Regional Provident Fund Commissioner Tamil Nadu & Pondicherry State Employees' Provident Fund Organisation 20, Royapettah High Road Chennai – 600 014.2. The Presiding Officer Employees' Provident Fund Appellate Tribunal 7th Floor, No.60 Skylark Building Nehru Place, New Delhi-110 019.1 cc To M/s.T.S.Gopalan., Advocate, SR.14917W.A.No.706 of 2008SR(CO)SRA(22/4/2009)